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Homework: Week Three Exercises Question # 1 S5-3 Consider the following transactions for Ocean View Drug Store: Requirements 1.

Journalize the purchase transactions. Explanations are not required.

2.

In the final analysis, how much did the inventory cost Ocean View?

Requirement 1. Journalize the purchase transactions. Explanations are not required. (Assume the company uses a perpetual inventory system. Round the answers to the nearest whole dollar. Record debits first, then credits. Exclude explanations from journal entries.) Jun. 22: Ocean View buys $22,700 worth of inventory on account with credit terms of 3/15, n/60 FOB shipping point.

Date Jun. 2

Accounts Merchandise Inventory Accounts Payable

Debit

Credit

22,700 22,700

Jun. 33: Ocean View pays a $130 freight charge.

Date Jun. 3

Accounts Merchandise Inventory Cash

Debit

Credit

130 130

Jun. 7: Ocean View returns $6,400 of the merchandise due to damage during shipment.

Date Jun. 7

Accounts Accounts Payable Merchandise Inventory

Debit

Credit

6,400 6,400

Jun.14: Ocean View paid the amount due, less return and discount.

Date Jun. 14

Accounts Accounts Payable Merchandise Inventory Cash

Debit

Credit

16,300 489 15,811

To figure: Take 22,700-6,400 = 16,300 Take 16,300*0.03 = 489 Now take 489 + 130 = 619 Now take 16,300-619 = 15,621 Now take 15,621 + 130 = 15,811

Requirement 2. In the final analysis, how much did the inventory cost Ocean View?

The inventory cost for OceanView is $

15,941 .

To solve: Take the Cash Amount of 15,811 + freight charge $130 = 15,941

Question # 2 S5-3 Consider the following transactions for Burlington Drug Store: Requirements Journalize the purchase transactions. Explanations are not required. In the final analysis, how much did the inventory cost Burlington?

1. 2.

Requirement 1. Journalize the purchase transactions. Explanations are not required. (Assume the company uses a perpetual inventory system. Round the answers to the nearest whole dollar. Record debits first, then credits. Exclude explanations from journal entries.) Jan. 2: Burlington buys $22,500 worth of inventory on account with credit terms of 2/15, n/60, FOB shipping point.

Date Jan. 2

Accounts Merchandise Inventory Accounts Payable

Debit

Credit

22,500 22,500

Jan. 4: Burlington pays a $130 freight charge.

Date Jan. 4

Accounts Merchandise Inventory Cash

Debit

Credit

130

Jan. 8: Burlington returns $6,200 of the merchandise due to damage during shipment.

130

Date Jan. 8

Accounts Accounts Payable Merchandise Inventory

Debit

Credit

6,200 6,200

Jan. 14: Burlington paid the amount due, less return and discount.

Date Jan. 14

Accounts Accounts Payable Merchandise Inventory Cash

*To Solve: Take 22,500 – 6,200 = Take 16,300 x 0.02 = Take 326 + 130 = Take 16,300 – 456 = Take 15,844 + 130 =

Debit

Credit

16,300* 326* 15,974*

16,300 326 456 15,844 15,974

Requirement 2. In the final analysis, how much did the inventory cost Burlington?

The inventory cost for Burlington is $

16,104* .

**To Solve: Take 15,974 + 130 = 16,104

Question # 3 S5-4 Journalize the following sales transactions for Paul Sportswear. Explanations are not required. The company estimates sales returns at the end of each month. (Assume the company uses a perpetual inventory system and records sales at the net amount.) Journalize the sales transactions. Explanations are not required. (Record debits first, then credits. Exclude explanations from journal entries.) Sept. 1: Paul sold $30,000 of men's sportswear for cash. Cost of goods sold is $19,000. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Sept. 1

Accounts Cash Sales Revenue

Debit

Credit

30,000 30,000

Now journalize the expense related to the September 11 Sale —Cost of goods sold, $19,000.

Date Sept. 1

Accounts Cost of Goods Sold Merchandise Inventory

Debit

Credit

19,000 19,000

September 3: Paul sold $65,000 of women's sportswear on account, credit terms are 3/10, n/60. Cost of goods is $35,000. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Sept. 3

Accounts Accounts Receivable Sales Revenue

Debit

Credit

63,050* 63,050*

**To Solve: Take 65,000 x 0.03 = 1,950, now take 65,000 – 1,950 = 63,050

September 5: Paul received a $3,500 sales return on damaged goods from the customer on September 11. Cost of goods damaged is $1,750. Start by preparing the entry to record the sales return and refund of cash. Do not update the Merchandise Inventory with this entry. We will do that in the following step.

Date Sept. 5

Accounts Refunds Payable Cash

Debit

Credit

3,500 3,500

Now prepare the entry to update the Merchandise Inventory account for the cost of the returned Merchandise —Cost of goods returned, $1,750.

Date Sept. 5

Accounts Merchandise Inventory Estimated Returns Inventory

Debit

Credit

1,750 1,750

September 10: Paul receives payment from the customer on the amount due, less discount.

Date Sept. 10

Accounts Cash Accounts Receivable

Debit

Credit

63,050 63,050

Question # 4 S5-4 Journalize the sales transactions. Explanations are not required. (Record debits first, then credits. Exclude explanations from journal entries.) Jun. 1: Paul sold $25,000 of men's sportswear for cash. Cost of goods sold is $11,000. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Jun. 1

Accounts Cash Sales Revenue

Debit

Credit

25,000 25,000

Now journalize the expense related to the June 11 Sale —Cost of goods sold, $11,000.

Date Jun. 1

Accounts Cost of Goods Sold Merchandise Inventory

Debit

Credit

11,000 11,000

Jun. 3: Paul sold $68,000 of women's sportswear on account, credit terms are 1/10, n/30. Cost of goods is $35,000.

Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Jun. 3

Accounts Accounts Receivable Sales Revenue

Debit

Credit

67,320 67,320

Now journalize the expense related to the June 3 sale—Cost of goods, $35,000.

Date Jun. 3

Accounts Cost of Goods Sold Merchandise Inventory

Debit

Credit

35,000 35,000

Jun. 5: Paul received a $5,500 sales return on damaged goods from the customer on June 11. Cost of goods damaged is $2,750. Start by preparing the entry to record the sales return and refund of cash. Do not update the Merchandise Inventory with this entry. We will do that in the following step.

Date Jun. 5

Accounts Refunds Payable Cash

Debit

Credit

5,500 5,500

Now prepare the entry to update the Merchandise Inventory account for the cost of the returned Merchandise —Cost of goods returned, $2,750.

Date Jun. 5

Accounts Merchandise Inventory Estimated Returns Inventory

Debit

Credit

2,750 2,750

Jun. 10: Paul receives payment from the customer on the amount due, less discount.

Date Jun. 10

Accounts Cash Accounts Receivable

Debit

Credit

67,320 67,320

Question # 5 S5-6 Suppose Amazing.com sells 5,000 books on account for $17 each (cost of these books is $51,000) on October 10, 2018 to The Salem Store. One hundred of these books (cost $1,020) were damaged in shipment, so Amazing.com later received the damaged goods from The Salem Store as sales returns on October 13, 2018. (Assume both companies use a perpetual inventory system and that sales are recorded at the net amount.) Requirement 1. Journalize The Salem Store's October 2018 transactions. (Record debits first, then credits. Exclude explanations from journal entries.) Oct. 10: The Salem Store purchased 5,000 books on account for $17 each from Amazing.com.

Date Oct. 10

Accounts Merchandise Inventory Accounts Payable

Debit

Credit

85,000* 85,000*

**To Solve: Take 5,000 X 17 = 85,000 Oct. 13: The Salem Store returned one hundred books damaged in shipment.

Date Oct. 13

Accounts Accounts Payable Merchandise Inventory

Debit

Credit

1,700* 1,700*

**To Solve: Take 100 x 17 = 1,700 Requirement 2. Journalize Amazing.com's October 2018 transactions. The company estimates sales returns at the end of each month. (Record debits first, then credits. Exclude explanations from journal entries.) Oct. 10: The sale of 5,000 books on account for $17 each (cost of these books is $51,000) to The Salem Store. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Oct. 10

Accounts Accounts Receivable Sales Revenue

Debit

Credit

85,000 85,000

Now journalize the expense related to the October 10 sale.

Date Oct. 10

Accounts Cost of Goods Sold Merchandise Inventory

Debit

Credit

51,000 51,000

Oct.13: The Salem Store returned one hundred books (cost $1,020) damaged in shipment. Start by preparing the entry to record the sales return. Do not update the Merchandise Inventory with this entry. We will do that in the following step.

Date Oct. 13

Accounts Refunds Payable Accounts Receivable

Debit

Credit

1,700 1,700

Now prepare the entry to update the Merchandise Inventory account for the cost of the returned merchandise.

Date Oct. 13

Accounts Merchandise Inventory Estimated Returns Inventory

Debit

Credit

1,020 1,020

Question # 6 S5-6 Suppose Amazing.com sells 2,000 books on account for $19 each (cost of these books is $22,800) on October 10, 2018 to Express Learning. One hundred of these books (cost $1,140) were damaged in shipment, so Amazing.com later received the damaged goods from Express Learning as sales returns on October 13, 2018. (Assume both companies use a perpetual inventory system and that sales are recorded at the net amount.) Requirement 1. Journalize Express Learning's October 2018 transactions. (Record debits first, then credits. Exclude explanations from journal entries.) Oct. 10: Express Learning purchased 2,000 books on account for $19 each from Amazing.com.

Date Oct. 10

Accounts Merchandise Inventory Accounts Payable

Debit

Credit

38,000* 38,000*

**To Solve: 2000 x 19 = 38,000

Oct. 13: Express Learning returned one hundred books damaged in shipment.

Date Oct. 13

Accounts Accounts Payable Merchandise Inventory

Debit

Credit

1,900 1,900

** To Solve: 100 x 19 = 1,900

Requirement 2. Journalize Amazing.com's October 2018 transactions. The company estimates sales returns at the end of each month. (Record debits first, then credits. Exclude explanations from journal entries.) Oct. 10: The sale of 2,000 books on account for $19 each (cost of these books is $22,800) to Express Learning. Begin by preparing the entry to journalize the sale portion of the transaction. Do not record the expense related to the sale. We will do that in the following step.

Date Oct. 10

Accounts Accounts Receivable Sales Revenue

Debit

Credit

38,000 38,000

Now journalize the expense related to the October 10 sale.

Date Oct. 10

Accounts Cost of Goods Sold Merchandise Inventory

Debit

Credit

22,800 22,800

Oct. 13: Express Learning returned one hundred books (cost $1,140) damaged in shipment. Start by preparing the entry to record the sales return. Do not update the Merchandise Inventory with this entry. We will do that in the following step.

Date Oct. 13

Accounts Refunds Payable Accounts Receivable

Debit

Credit

1,900 1,900

Now prepare the entry to update the Merchandise Inventory account for the cost of the returned merchandise.

Date Oct. 13

Accounts

Debit

Merchandise Inventory Estimated Returns Inventory

Credit

1,140 1,140

Question # 7 S5-9 Data Table Cost of Goods Sold Accounts Payable Rent Expense Building Rockwall, Capital Merchandise Inventory Notes Receivable

$380,00 0 20,000 21,000 116,000 212,000 257,000 31,000

Accumulated Depreciation-Building Cash Sales Revenue Depreciation Expense-Building Rockwall, Withdrawals Interest Revenue

$48,000 45,000 705,000 16,000 55,000 6,000

Requirements 1. Journalize the required closing entries for Rockwall. 2. Determine the ending balance in the capital account.

Requirement 1. Journalize the required closing entries for Rockwall. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Start by closing the revenue accounts for the period. Do not close expenses; we will do this in the next step. Start by closing the revenue accounts for the period. Do not close expenses; we will do this in the next step.

Date Dec. 31

Accounts and Explanation Interest Revenue Sales Revenue Income Summary To close revenue accounts.

Close expenses for the period.

Debit

Credit

6,000 705,000 711,000

Date Dec. 31

Accounts and Explanation Income Summary Rent Expense Depreciation Expense—Building Cost of Goods Sold

Debit

Credit

417,000 21,000 16,000 380,000

To close expense accounts. Close Income Summary.

Date Dec. 31

Accounts and Explanation Income Summary Rockwall, Capital

Debit

Credit

294,000** 294,000**

To close Income Summary. ** To Solve: Take Closing Revenues Income Summary of 711,000 – Expense Income Summary 417,000 = 294,000 Close Withdrawals.

Date Dec. 31

Accounts and Explanation Rockwall, Capital Rockwall, Withdrawals

Debit

Credit

55,000 55,000

To close withdrawals. Requirement 2. Determine the ending balance in the Rockwall, Capital account.

The capital balance at December 31, 2018 is $

451,000**

**To Solve: Take Beginning Capital 212,000 + Income Summary 294,000 = 506,000 now take 506,000 – Closing Withdraws of 55,000 = 451,000

Question # 8 S5-10 Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:

Cash Selling Expenses Accounts Payable

$4,000 1,600 5,400

Carmen, Capital Notes Payable, longterm Merchandise Inventory Administrative Expenses

5,055 1,300 700

Cost of Goods Sold Equipment, net Accrued Liabilities Net Sales Revenue Accounts Receivable Interest Expense

$18,600 11,000 1,300 29,800 3,700 55

3,200

Prepare Carmen Communications's multi-step income statement for the year ended July 31, 2018. (Use a minus sign or parentheses to show other expenses.)

Carmen Communications Income Statement Year Ended July 31, 2018 Net Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses Administrative Expenses

$29,800 18,600 11,200 $1,600 3,200 4,800

Total Operating Expenses Operating Income Other Income and (Expenses): Interest Expense

6,400 (55)

Total Other Income and (Expenses) Net Income (Loss)

(55) $6,345

To Solve Operating Income: Take Gross Profit 11,200 – Total Operating Expenses 4,800 = 6,400 To solve Net Income: Take Operating Income 6,400 – Total other expenses 55 = 6,345

Question # 9 S5-11 Carrie Communications reported the following figures from its adjusted trial balance and from its multistep income statement for its first year of business, which ended on July 31, 2018:

Cash Selling Expenses Accounts Payable Carrie, Capital Notes Payable, longterm Merchandise Inventory Administrative Expenses

Cost of Goods Sold Equipment, net Accrued Liabilities Net Sales Revenue Accounts Receivable Interest Expense

$4,200 1,500 4,200 5,735 400 1,300

$19,500 8,600 1,700 29,400 3,100 35

3,200

Carrie Communications Income Statement Year Ended July 31, 2018 Net Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses: $1,50 Selling Expenses 0 Administrative Expenses 3,200 Total Operating Expenses Operating Income Other Income and (Expenses) Interest Expense -35 Total Other Income and (Expenses) Net Income (Loss)

$29,40 0 19,500 9,900

4,700 5,200

-35 $5,165

Requirement 1. Prepare Carrie Communications's statement of owner's equity for the year ended July 31, 2018. Assume that there were no contributions or withdrawals during the year. (Enter a "0" for any zero balances. Include only applicable transactions during the period.)

Carrie Communications Statement of Owner's Equity Year Ended July 31, 2018 Carrie, Capital, August 1, 2017 Net income for the year

$5,735 5,165

$10,900

Carrie, Capital, July 31, 2018

Requirement 2. Prepare Carrie Communications's classified balance sheet at July 31, 2018. Use the report format. Begin by completing the assets section, then complete the liabilities and owner's equity sections. (If a box is not used in the balance sheet, leave the box empty; do not select a label or enter a zero.)

Carrie Communications Balance Sheet July 31, 2018 Assets Current Assets: Cash Accounts Receivable Merchandise Inventory

$4,200 3,100 1,300

Total Current Assets Property, Plant, and Equipment:

$8,600 8,600

Equipment, net

8,600

Total Property, Plant, and Equipment

$17,200

Total Assets Liabilities Current Liabilities: Accounts Payable Accr...